On August 21, Alibaba declined 3.24% overnight, trading at $126.19/share, with turnover of $27.25 million.

The decline was triggered by the company's FY2027 Q1 earnings release, which showed revenue of 268.95 billion yuan, up 9% year-over-year and slightly above the consensus estimate of 268.52 billion yuan. However, adjusted net profit came in at 207.2 billion yuan, significantly below the market expectation of 255.8 billion yuan. GAAP net income attributable to shareholders plunged 76% year-over-year, while operating profit dropped 57% to 15.16 billion yuan.

The profit shortfall was driven by aggressive AI infrastructure investment, with quarterly capital expenditure surging 75% year-over-year to 67.68 billion yuan. Despite Alibaba Cloud external revenue growing 45% and AI-related product revenue achieving triple-digit growth for 12 consecutive quarters with annualized revenue reaching 49.5 billion yuan, the near-term margin compression from massive spending weighed on sentiment. Management indicated AI-related capex is expected to break even within three years, as the company prioritizes long-term AI competitiveness over short-term profitability.

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